Alpha Metallurgical Resources, Inc.

greetings welcome to the alpha metallurgical resources fourth quarter 2022 result conference call at this time all participants are on the listen-only mode a question and answer session will follow the formal presentation please note this conference is being recorded i would now like to turn the conference over to your host emily o'quinn senior vice president investor relations and communications you may now begin thank you rob and good morning everyone

Before we get started, let me remind you that during our prepared remarks, our comments regarding anticipated business and financial performance contain forward-looking statements, and actual results may differ materially from those discussed. For more information regarding forward-looking statements and some of the factors that can affect them, please refer to the company's fourth quarter 2022 earnings release and the associated SEC filing. Please also see those documents for information about our use of non-GAAP measures and their reconciliation to GAAP measures. Participating on the call today are Alpha's Chief Executive Officer, Andy Edson, and our President and Chief Operating Officer, Jason Whitehead. Also participating on the call are Todd Muncy, our Chief Financial Officer, and Dan Horn, our Chief Commercial Officer. With that, I'll turn the call over to Andy.

Thanks, Emily. Good morning, everyone. As always, we will provide some additional detail on Alpha's fourth quarter results and our outlook for 2023 on the call today. But before we do that, I want to take a very quick look back at 2022. What a tremendous year it was. Our alpha team shipped 16.4 million tons of coal to customers in 26 countries around the world. We generated a record adjusted EBITDA of $1.7 billion and $1.3 billion of free cash flow, which allowed us to completely pay off our term load balance, making the company free of long-term debt. We invested significantly in our workforce through compensation, enhanced benefits, and incentive bonus opportunities for exceptional performance. We bought back over a half a billion dollars worth of alpha stock and returned another roughly $100 million to shareholders in the form of dividends declared in 2022. All of this was achieved at the same time the company posted record safety rates for NFDL, or non-fatal days lost, and performed better than the industry average in NFDL and total reportable incident rate, or TRIR. We were able to maintain 99.9% water quality compliance alongside our expanded focus on beyond compliance initiatives. Our mine rescue teams won a national championship last year with several other first place awards in both overall competition honors and technical category titles. On the environmental stewardship front, Alpha's Tom's Creek Impoundment and Tom's Creek South Deep Mine received the Metallurgical Coal Producers Association 2022 Best Active Refuse Impoundment Award and best completed underground mine award, respectively. The consistent focus on safety and environmental compliance is further bolstered by friendly competition through our best-in-class awards that allow our operating groups to compete against each other for top honors within their operational category. The winners were just announced, and we're proud to congratulate the Glen Alum Tonal Mine, Marfork Transfer System, Kingston South Surface, or the Bishop Mine, the Kepler Processing Plant, and the Marmot River Doc on their selection as best in class for 2022. Within the last several months, we also successfully completed an executive leadership succession plan. In August, after many years as senior vice president and controller, Todd Muncie stepped into the chief financial officer position. At year end, David Stetson moved into the executive chairman role, and I took over as CEO. Jason Whitehead is continuing as our Chief Operating Officer, and he's expanded his leadership role to include serving as Alpha's President as well. All of these changes have gone smoothly, and together alongside Roger Nicholson and Dan Horn, Jason, Todd, and I are hard at work to make 2023 another great year for the company. With nearly two months of this calendar year under our belts now, I remain cautiously optimistic about the full year's prospects. As we said in the release this morning, the geological and transportation issues that dampen our fourth quarter results appear to be largely behind us, thanks to the hard work of our various operations and logistics teams. We were not satisfied with how we finished this year, because we do hold ourselves to a very high standard. And at that end, we're pressing ahead with an ambitious year from a production and sales perspective, and the team is performing very well so far against those goals. Due to sustained global metallurgical coal supply tightness, Coal markets are continuing to show strength with the key US East Coast indices we follow moving upward over the last few weeks and the Australian PLV approaching $400 again. Together with the positive rail performance we've been experiencing recently, the foundation for a very good year seems to be in place. While neither coal markets nor rail performance are within office control, there are key steps we are taking to manage our own destiny to the degree that we can. In looking at some of the most challenging obstacles of the past few years, Three broad areas are at the top of mind, supply chain, trucking, and labor. These challenges are by no means unique to Alpha, but I believe we've taken a uniquely Alpha approach to mitigating them. Jason will share more in his remarks, but Alpha's subsidiary, Maxim Rebuild, is vertically integrated with two new areas of focus, Maxim Manufacturing and Maxim Transportation. I see both strategic actions, making some of our own machine parts and trucking some of our own coal, as examples of the resilient alpha mentality, which sometimes says, we'll just do it ourselves. We pride ourselves on finding solutions to problems, and I believe these two new departments will prove beneficial to the company in the immediate near term, but also especially in the years to come. Turning now to labor, the third challenge I listed. We invested significantly in our workforce to retain the exceptional professionals already a part of our team and to attract others to join. We've also invested in training, with nearly 200 employees completing our Red Hat Apprentice Monitor Program, and another 50 completing electrical training within 2022. As a result, we saw our overall turnover rates ticking downward as the year developed, and we seek to continue that progress through 2023. We plan to continue building on this momentum across all three of these areas, which I believe will allow Alpha to be better prepared for whatever the rest of the year may bring. Strategically, as we look ahead to priorities for the near term, We will continue to protect the balance sheet, maintaining the cash and liquidity targets we've discussed. For free cash flow above these levels, we remain committed to share repurchases as the most value-creating focus for our capital return program. The board just increased the share repurchase authorization by another $200 million, bringing the total authorization up to $1.2 billion. Given the significant fluctuation in the indices over the last 12 months, we're reminded of the cyclicality of our industry and the ongoing need to manage costs. This is true in any pricing environment, but it's especially important in times where the indices moderate, leaving less for us to capture margin that could fuel the operational and capital return priorities we've set. Therefore, we remain committed to cost management to ensure that we are well positioned for any pricing environment that may develop. In short, we're actively managing alpha to control what we can and mitigate what we can't. And we remain excited about our market share production capabilities and solidifying our role as an industry leader. So with that, I'll turn it over to Todd for discussion of our financial results. Thanks, Andy. We preannounced our financial results due to the previously discussed geological and transportation challenges that dampened our fourth quarter 2022 results in what was otherwise an exceptional year, as Andy mentioned. Fourth quarter adjusted EBITDA was $248 million, which was down from our third quarter level of $296 million. We sold 3.9 million tons in the quarter, 3.8 million of which came from our MET segment and 100,000 tons from the all-other category. Our quarter-over-quarter realizations improved slightly for the MET segment as a whole, with an average realization of $186.29 for the fourth quarter as compared to $184.31 in Q3. Export met tons priced against Atlantic Indices and other pricing mechanisms in the fourth quarter realized $196.88 per ton, while export coal priced on Australian Indices realized $183.59. Our fourth quarter realization for our metallurgical sales was a total weighted average of $190.94 per ton, essentially flat against the prior quarter's $191.17 per ton. Realizations in the incidental thermal portion of the MET segment increased quarter over quarter, coming in at $146.24 in Q4 as compared to an average of $119.69 per ton for Q3. This higher realization reflects the increase in thermal pricing for the period when the tons were sold. Fourth quarter realizations in the all-other category were $126.10 per ton, up from $109.27 per ton for the third quarter. Again, a reflection of the temporarily improved pricing environment for thermal coal, which has since fallen off. Cost of coal sales within our MET segment increased to $112.97 per ton, up from $104.86 per ton in the third quarter. This increase includes higher than budgeted labor costs due to incentive bonuses paid to employees across the organization to reward our team for a year of excellent performance. Cost of coal sales in the all-other category rose to $80.76 per ton, up from $67.48 per ton in the third quarter, due again in part to high labor costs, but also higher sales-related costs for thermal coal, resulting from an improved pricing environment, as well as the impacts of late-stage mining at our slab-count mine. SG&A, excluding non-cash stock compensation and non-recurring items, increased to $19 million in the fourth quarter, as compared to $13.6 million in the third quarter. The increase is primarily attributable to incentive bonuses paid within the quarter, as well as higher professional fees. Fourth quarter CapEx was $61 million, up from $33.3 million in Q3. Moving to the balance sheet and cash flows, as of December 31st, 2022, we had $348 million in unrestricted cash and short-term investments, down from $404.4 million at the end of the third quarter. We had $93.1 million in unused availability on our ABL at the end of the year. Alpha had total liquidity of $441.1 million as of the end of December. which is net of the $127.8 million in share repurchases during the quarter and $84.7 million in deposits in Q4 related to the special and quarterly dividends paid in early January. By comparison, total liquidity at the end of the third quarter was $495.5 million. Cash provided by operating activities decreased quarter over quarter to $185 million in Q4 as compared to $497 million in Q3. In total, Alpha generated $1.48 billion in cash from operating activities in 2022. As of December 31st, our ABL facility had no borrowings and $61.9 million of letters of credit outstanding, down slightly from the prior quarter. We are pleased with our committed position for 2023 sales. 38% of our metallurgical tonnage in our MET segment is committed and priced at the midpoint of guidance at an average price of $195.89. Another 38% of our 2023 MET tonnage at the midpoint is committed but not yet priced. The thermal byproduct portion of the MET segment is 52% committed and priced at an average price of $119.79. And we are almost fully committed and priced 97% for this year in our All Other category, with an average price of $94.08. Looking now to our dividend program, Alpha's board has declared a quarterly cash dividend of $0.44 per share, an increase from the prior quarter's $0.41.8 per share, which will become payable on April 3rd for holders of record as of March 15th. In terms of share repurchases, we have continued to buy back shares of our common stock, and in the fourth quarter of 2022, we repurchased 813,000 shares at a cost of $128 million. Since the beginning of the program through the end of January 2023, we have spent approximately $560 million to acquire 3.8 million shares of Alpha's common stock at a weighted average price of $145.54 per share. The outstanding share count has been reduced by nearly 18% from the time the program began. As of January 31, 2023, the number of common stock shares outstanding was approximately 15.3 million. As Andy mentioned earlier, Alpha's board increased the buyback authorization by $200 million, bringing our total authorization for share repurchases to $1.2 billion. Before I hand the call over to Jason, I want to make a quick comment on the recent actions of the Department of Labor and their newly proposed regulations related to collateral requirements to secure self-insured federal black loan obligations. If adopted, the new regulations could substantially increase alpha's required collateral. Under the DOL's proposed 120% minimum collateral requirement, we estimate we could be required to provide approximately 80 to $100 million of collateral to secure certain of our Black Lung obligations. While a portion of this could be covered by third-party bonding or other non-cash arrangements, we will continue to monitor this process and its potential impact to our balance sheet. I will now turn the call over to Jason for some details on operations. Thanks, Todd. Good morning, everyone. I want to start with a shout-out to the 2022 Best in Class winners. Y'all showed great leadership and set the bar even higher for this year's competition. Congratulations again to Glen Island Tunnel for winning the underground mine category. Marfork for winning the underground belt transfer system category. Kingston South Surface Mine, also known as Bishop, for winning the surface mine and high wall miner division. And congratulations to Kepler for achieving top honors in the processing plant category. and Marmet River Dock for our best loadout facility. We're all proud of our best-in-class winners. From an operations perspective, the end of 22 was exceptionally busy. As we've disclosed, there were some geologic and transportation challenges that hampered our fourth quarter results. But we've taken a number of steps to mitigate those challenges. Based on January numbers and what we're seeing so far in February, I believe these issues are mostly behind us. One way of looking at this is through our inventory levels at Dominion Terminal Associates Facility in Newport News, Virginia. As you know, roughly two-thirds of our MET production is funneled through our DTA facility. Due to a number of factors, including supply chain shortages, transportation availability, power outages and interruptions, the holiday schedules, and other timing concerns, we hit an inventory trough at DTA of approximately 47,000 tons in December. Since then, we've grown that about tenfold to a more appropriate level of working inventory of shipable coal that we expect to ship to customers in the coming weeks and months. This timing pairs up nicely with the movement and the indices that with the Aussie PLV moving up roughly 34% over the last two months, and Platts' U.S. East Coast lowball moving up 25% over the same time period. One of the highest priorities for us as a management team is to proactively protect our ability to continue the basic operations of our business. Most, if not all, of our businesses went through the dramatic supply chain issues stemming from COVID, but as some issues resolved, it became clear to us that others were more structural and may not resolve themselves. Therefore, we decided to step in and vertically integrate our Maxim Rebuild Division, which has historically worked to rebuild underground mining equipment. Now, two new departments have been created, Maxim Manufacturing and Maxim Transportation. We established these two new aspects of the company to address very real problems within the supply chain for certain equipment parts, like gear cases, and in the trucking of our coals to preparation plants and loadouts. In the case of Maxim Manufacturing, we acquired certain assets of industrial plating and machine at Bluefield, West Virginia. We have worked with them for some time on essential mining equipment components, and now we have bought these operations in-house to optimize our parts supply. Turning to the new trucking division, Maxim Transportation. As we analyze some of the bottlenecks in our ability to efficiently get our coal from point A to point B, we recognized a significant opportunity to acquire our own trucks and run our own logistics planning to best utilize the transportation options available. Over the course of a few small transactions, Alpha now has acquired roughly 75 on-road coal trucks, and we employ a team of drivers to move our coals from the mines to the preparation plants, loadouts, and barge facilities. While it's natural to experience a few hiccups in the early days of acquisitions like these, Both Maxim Manufacturing and Maxim Transportation are meeting our expectations and present further value-added opportunities as we look ahead to how we might use additional integrations to complement these efforts. I want to again welcome these new team members to Alpha. I want to thank the current employees who have worked tirelessly to get both of these ambitious goals accomplished in a very short period of time. Lastly, I want to briefly mention our newest mine currently in development. Rolling Thunder, this is a highball mine in West Virginia that we expect to take its first cuts this summer. We are excited about the possibilities this mine will bring due to its proximity to our existing operations, and we'll keep you updated on the progress as we move ahead. With that, I'll turn the call over to Dan for some additional information on the markets and our sales efforts.